Portugal’s Unnecessary Bailout

By ROBERT M. FISHMAN

April 12, 2011 New York Times

PORTUGAL’S plea for help with its debts from the International Monetary Fund and the European Union last week should be a warning to democracies everywhere.

The crisis that began with the bailouts of Greece and Ireland last year has taken an ugly turn. However, this third national request for a bailout is not really about debt. Portugal had strong economic performance in the 1990s and was managing its recovery from the global recession better than several other countries in Europe, but it has come under unfair and arbitrary pressure from bond traders, speculators and credit rating analysts who, for short-sighted or ideological reasons, have now managed to drive out one democratically elected administration and potentially tie the hands of the next one. 

Read the full article on The New York Times

After the meltdown: Regulating the financial markets by Yvan Allaire

Prof. Yvan Allaire

The financial crisis of 2007-08 has generated new rules, regulations and guidelines to cope with the flaws and faults of the international financial system. What kind of regulatory context is likely to evolve from this massive effort? Will it be sufficient to prevent the next bubble and crisis? Or is this only a political operation to placate an angry population? Clearly, the sum total of new rules and regulations once fully implemented would prevent a crisis of the same form and nature as the last one. But will it prevent the next one? That is the question.

Read the full article of Yvan Allaire on "Options Politiques" !

Limits of openness

Limits of openness

8/17/2009
Author : Daniel Daianu
THE ONLY EUROPE-WIDE IDEAS COMMUNITY
EUROPEAN IDEAS COMMUNITY
By Daniel Daianu, former MEP and former finance minister of Romania

The current world financial crisis compels to deep soul searching and scrutiny of where top politicians and their advisers were wrong. Never mind that stern warnings on the incoming crisis were made by astute economists and financiers years ago. Unfortunately, vested interests prevailed over the cautionary words of Warren Buffett, Edward Gramlich, Alexander Lamfalussy, Paul Volcker and others. This crisis underlines pitfalls and dangers of financial deregulation (lack of regulation) in global markets and raises fundamental issues for public governance; it should be seen in conjunction with the resounding fracas of the Doha trade round, with the resurrection of economic nationalism in industrialized economies, which is not of recent vintage, and not least with geopolitical consequences of the economic rise of China and other emerging global powers. This crisis should be judged against the backdrop of the effects of climate change, of the mounting fear about nearing limits of exhaustible resources —which raises huge security concerns.

Arguably, the coming to grips with the effects of this financial and economic crisis, together with food, environment, drinking water and energy-related concerns forces national governments to reassess the advantages of unrestrained economic openness; systemic risks, not only of a financial nature, will increasingly be a focus of public agenda in the years to come. This reassessment involves more government presence in the economy as well as broader regulatory frameworks; some of it is prompted by the exceptional circumstances of the crisis, but the whole context is undergoing a change of zeitgeist and policy paradigm.

What went wrong

During the last decades rapid technological change has reduced transportation and transaction (information) costs enormously and has speeded up the transfer of know-how, albeit in a highly skewed manner, among regions of the world; the internet connects hundreds of millions of people instantaneously nowadays. World trade has expanded at a very rapid pace and broadened the scope of choice for individuals throughout the world. The collapse of communism has expanded the work of market forces and democracy in a large area of the world. And the very dynamic of the EU can be seen as an alter ego of globalisation on a regional scale.

However, we are now in the midst of the deepest financial crisis after the Great Depression, which has erupted after a sequence of other episodes of crisis in the US and Europe during the last couple of decades; this indicates the increasing instability of the world financial system —as it has evolved during recent decades. Likewise, financial and currency crises have been recurrent in emerging markets in the same period of time and have caused economic and social havoc in not a few countries, while world trade liberalisation has left many poor countries in the dust. The distribution of wealth in the world seems to be more unequal nowadays than 20 years ago; the myth of the "new economy" dissipated and corporate scandals in the affluent world show that cronyism and bad governance are a more complex phenomenon than is usually assumed and ascribed geographically; social fragmentation and exclusion have been rising both in rich and poor countries; there is a sense of disorder and a rising tide of discontent and frustration in many parts of the world. Can we make some sense of all this in relation with policy dynamics?

The past two decades have been suffused with claims that economic policy, in the advanced countries, is bring driven by an emerging new consensus on principles and practice. One origin of this "consensus" could be ascribed to the ever longing desire of Man to control his environment and be more efficient. Max Weber’s “rationalization of life” referred to rational accounting, rational law, rational technology, which by extrapolation, can be extended to “rational economics”. Daniel Bell upheld the primacy of knowledge and theory-related activities in ordering our life, man’s technological and economic ascendancy — which would imply that economic wizards can secure a fool-proof policy. Even the clash between keynesism and monetarism, as the two main competing macro-economic paradigms, could be seen in the vein of searching the ultimate piece of wisdom. Another origin of policy amalgamation came out of the death of communism. Francis Fukuyama’s “End of History” was seen by many as an embodiment of a, presumably, single cosmology which was meant to rule the world. At that time Reagan's and Thatcher's revolutions were in full swing in the US and the UK, respectively. The fall of communism favoured immensely the advance of neo-liberal ideas. Internationally this dynamic was reflected by the expansion of global markets, globalization. “The world is flat”, to use Thomas Friedman´s sintagma, became synonymous with economic development reaching out to all corners of the earth provided adequate policies are put in place. By adequate policies one understood, mostly, the Washington Consensus., which encapsulated policies and practices advocated by IFIs.

Needless to say that the overwhelming superiority of the US on all fronts (economic, military, technological), offered a sui generis Pax Americana and created prerequisites for an international regime. The latter was supposed to order the world by providing international public goods, a widely embraced vision, and resolving/preventing possibly major conflicts.

But economics as a hard science is only a dream, while market fundamentalism has revealed its serious weaknesses over time, and its coup de grace is, arguably, the current financial and economic crisis. It is true that liberalization and extensive privatization did transform post-communist societies in Central and Eastern Europe and allowed most of them to join the EU. But their case is quite unique owing to geography, cultural and political consciousness, and considerable support from the US and Western Europe. It is also true that market-oriented reforms have unfettered entrepreneurship and have stimulated economic growth in China after 1978, and in India during the last decade, but those reforms have been implemented in a pragmatic way, with a close attention paid to social issues and rural development problems, while financial and trade markets have not been liberalized recklessly.

The interpretation of liberalization/globalisation, which I mention above, puts emphasis on unbridled markets, privatisation (of public utilities too) and downsizing of the public sector to the utmost. This philosophy has widened to international markets - finance and trade - and the IFIs have often championed it. Let me give an example. The IMF and the World Bank advocated capital account liberalization worldwide, and South Korea’s entry in the OECD was preconditioned by its capital account opening As many accept nowadays the Asian crisis, of a decade ago, was caused, primarily, by a premature opening of the capital account in the economies of that region.

Reinterpreting globalisation

But globalisation (and liberalisation) can be understood in a different vein, which looks at the actual functioning of global markets - with their pluses and minuses - and which takes into account insights of economic theory such as informational asymmetries, increasing returns (while technological progress is intense —endogenous growth), agglomeration effects (clusters), multiple (bad) equilibria, coordination failures, the role of economic geography, and so on. As these theoretical constructs and, a fortiori, the effects of the current financial crisis suggest, there are lessons to learn: the need for effective regulation of markets; the role of the state in providing public goods; the role of institutions (structures of governance); the need of public goods and effective governance in the world economy; the importance of variety and policy ownership in policy-making.

To some, this interpretation of globalisation may sow seeds of confusion. But, in this way, one can dispel a biased interpretation of it. By the way, I have always been baffled by the language used by some media when describing market-friendly reforms. Is a rescue package, like the ones destined currently to help banking sectors get out of trouble, against the logic of a market economy? For a market fundamentalist it may be, but for those who, while acknowledging governments failures, see market failures as well, the need for intervention—in order to prevent a meltdown, a terrible crisis—gets another connotation, which is not inimical to market economics. Similarly, is a Keynesian approach in policy-making not market-friendly? And I could continue along this line of reasoning. Moreover, globalisation would no longer be assigned an ideological mantra and one-sided policy implications. Instead, it becomes an open-ended concept, which purports to define the mutual "opening" of societies, under the impetus of technological change and the manifold quest for economic progress. Such an opening should be pragmatic and flexible. By flexibility one can imply policy reversals as a function of changing circumstances —be they in the realm of trade, finance, industrial policy, etc. Moreover, such an interpretation rids itself of a perceived West-centered origin. Such an unconstrained interpretation of globalisation would have major repercussions for national public policies and international politics.

Thus, national public policies could be fairly pragmatic, varied and geared towards the traditional goals of economic growth, price stability and social justice. There is no modern economy that does not blend the public and the private spheres. Some could say that too much variety in institutional and policy design would damage a level playing field and impede markets to function effectively. And there is truth in this argument, but which is one-sided. For it underplays the importance of working out policies that keep in mind the extreme diversity of conditions in the world economy and the fact that market forces do not bring convergence automatically. As a matter of fact they may even increase discrepancies, as they often do, because of cumulative causation processes. And if we add here the inexistence of a world government, which should try to do what the EU tries to achieve via its cohesion policy inescapable conclusions come to the fore (just keep in mind the abysmal results of the Millenium Agenda). Let me focus now on finance and trade as fields which relate national economies to each other and where policy reassessments seem to be in the making.

As the current crisis amply shows one of Keynes' intellectual legacies, which is enshrined in the Bretton Woods arrangements —namely, that highly volatile capital flows are inimical to trade and prosperity—has not lost relevance. For decades now a mantra has been heard worldwide: that not much can be done in national policy-making because global markets would punish a government. But is the complexion of global markets God given? Are n't global markets, aside from their technological drivers, also the product of human beings' decisions to set rules for finance, trade and investment. The argument that we should not turn the clock back may be right in the sense that open systems bring benefits and should be protected as much as possible. And here Pascal Lamy’s and other top international public servants’ worries are well founded. But to claim that nothing can be done about financial flows, when they bring about misery, is unconvincing. Can the parallel banking sector (including hedge funds and private equity funds) be regulated? Definitely, it can! Can we restrain leverage in finance? Sure we can. Can we forbid short-selling if the need arises? Certainly we can. Can we regulate rating agencies? Sure we can. Can we impose capital account restrictions in case of need, though one has to think about regulatory arbitrage? Sure we can. Those who say that it is hard to fetter capital movements in our times have a point, but not a peremptory one. Likewise, the argument that financial innovation should be unchecked sounds hollow in view of the toxicity of many of its products. For not all financial innovation is sound.

Free trade as a headline will continue to be paid lip service worldwide but, in the years to come trade patterns will likely be reexamined owing to growing security concerns of national states. One type of concerns originates in the costs of adjustment to competitive pressures. In a global economy where win-lose situations are not rare and in which currently leading economies can be on the losing side trade and investment restrictions, more or less subtle, would be resorted to. The are seminal studies (of Paul Krugman, Elhanan Helpman, Herschel Grossman, etc) which show that industrial, investment and trade policies can make a difference, for the better, for those which practice them. And western countries may try to use them in order to protect their competitive edges in the world economy. Le doyen of world economists, Paul Samuelson, also contributed to this debate ( Journal of Economic Perspectives: “ Where Ricardo and Mill rebut and confirm arguments of mainstream economists supporting globalization”, no.3/2004, pp.135-147). Other type of concerns relate to “hard security”. "Trading with the rival" worries may lead to the imposition of restrictions —very much in the vein of the old COCOM norms (which operated during the Cold War). Likewise, would the US, or major EU member states accept big chunks of their most sensitive manufacturing and IT sectors being acquired by Chinese, or Russian companies (or SWFs belonging to these countries)? Trade restrictions may pop up also due to the thinking that it pays not to rely too much on overseas suppliers regarding basic food. Climate change could also force governments to see indigenous farming as a way to protect the local habitat, which may filter down a narrowly defined rationalization of trade flows dramatically. The security and the cost of managing networks would also come increasingly into the picture —terrorism being a factor here too. We may think globally, but be forced, owing to various risk-related considerations, to limit ourselves to what are perceived as safer patterns of trade and production. In this way one can think of an optimal trade openness. Ironically, managed openness may be better for competition to the extent unrestrained liberalization leads to the formation of a few giant global companies in various fields (the current financial crisis favors big groups which can swallow weaker competitors)

This myriad of concerns could also stimulate the formation of alliances (trade and not only) among groups of countries that share common interests. The EU is already such a bloc. A transatlantic trade area could also emerge. We could see a replica of it in Asia, though the rivalry between China, India and Japan will be a big handicap in this respect. But keep in mind that there was talk about setting up a monetary union in the wake of the Asian crisis and such a proposal may come into being in the end. And if the yuan turns into a reserve currency the rationale for creating an Asian monetary area would grow.

How would the EU evolve in this world context? The logic of single markets would continue to dominate but policy-making will be quite nuanced at national level. There will be more regulation of financial markets, both at national and EU (MU) level. National governments will be more active in the economy. By activism I think of efforts to support sectors and companies that are deemed essential for national security. As long as the EU will not develop a common foreign and security policy, which should be supported by a larger collective budget as well, national governments will not give up what they see as vital for their security. Therefore the EU will continue to have a pretty complicated policy-making structure, while variable geometry will likely be on the rise.

Barriers to unrestrained free world trade, investment and finance would also stem from the global system getting multipolar. The effects of the current financial crisis have hit the western world at a time when tectonic shifts in the global economy had been taking place for more then a decade. The rise of China, India, Brazil, the resuscitation of a capitalist Russia (that benefits on huge natural resources) are ushering in an increasingly multi-polar world, with growing reverberations economically and geopolitically. The rise of sovereign wealth funds, which are heavily concentrated in Asia and the Gulf region illustrates the shifting balance of power in the world. The struggle for the control of exhaustible resources (oil and gas in particular) epitomizes this phenomenon.

Who would formulate and enforce a suitable international regime for the 21st century? On its own the US does not have this capacity any longer. And I hardly see the EU taking over such a role. If EU member states have such a hard time in seeing eye to eye when dealing with the causes of the financial crisis (ex: the British opposition to more regulation of the financial markets, as against the French and German view) think about insurmountable problems at the international level —where Realpolitik considerations play a critical role. Besides, in a multi-polar world the establishment of an international regime is a very complicated affair. The IFIs, the international architecture need to be reformed. But their reform hinges on what the main international actors wish to do in this respect and on how they relate to each other. That G20 seems to take the place of G8 is not a sufficient ground for optimism in this regard. Nevertheless, I dare to believe that if the US, the EU, and the emerging global powers (China, India, Russia, etc) can strike a deal to this end other significant players would come along eventually.

To conclude: I submit that a combination of two dynamics will develop as a means to preserve an open global economic system, be it in a looser form. One dynamic refers to a partial domestication of market forces in national governments’ quest to cope with systemic risks and social strain. This would involve more state presence in the economy (state capitalism) and broader regulations; elements of “war economy” conduct in public policy will also be quite visible, in liberal democracies too (a thesis I have argued about in a previous article of mine in Europesworld, and which is illustrated glaringly by how governments in the western world have reacted to the effects of this financial crisis). I should say that ideological propensities are less involved here, for governments act, basically, out of sheer necessity. The other dynamic refers to blocs of countries that decide to use a common currency and trade more intensively among themselves; such arrangements would be a means to avoid brutal disruptions to their internal activities were a global crisis occur. This is like saying that the global system needs several sub-global clusters in order to mitigate the potentially devastating effects of a completely open world system that would be prone to recurring major crises. The latter state of a global system being, in reality, unsustainable because of its unavoidable motion toward an eventual breakdown and proliferating fragmentation effects. About a decade ago Dani Rodrik, who is one of the most insightful development economists remarked that not any globalization is good for poor countries (The new global economy and developing countries. Making openness work, Washington DC, Overseas Development Council, 1998). I would paraphrase him and say that openness has to be made to work for the world as a whole, which implies shedding the blind belief in the self-healing and self-regulatory virtues of markets.

Advice to the IMF: An open letter to Mr. Jeffrey Franks, IMF representative for Romania

Advice to the IMF

An open letter to Mr. Jeffrey Franks, IMF representative for Romania

Dear Mr. Franks

Here’s some advice to the International Monetary Fund (IMF) which loves to give advice and instructions to all and sundry governments about how to run their affairs. That advice always draws from the same fountain of ideologies, orders the same old, tired, discredited set of prescriptions.

For instance, large scale privatization and deregulation, inspired by the dominant Reagan-Thatcher era ideology, have produced mixed results. Even in the best of circumstances such as in the UK, the outcome has often been disappointing and led to several failures. The British railways are privately run but government-subsidized; the French railways are State-owned. Guess which country has the better railway system. British airports were privatized; yet Heathrow has a dismal performance  record (but investors who bought the shares at the time of privatization made piles of money).

Remarkably, even in the wake of the financial crisis, which has cast a permanent pall on the supposed virtues of “free markets” and “market efficiency”, there remains pockets of ideologues (and self-interested promoters) advocating wholesale privatization of State-owned companies in the developing world.

The IMF has been a haven for these ideologues, a loud and truculent promoter of massive privatization of State–owned enterprises.

Your strategies and tactics are rightly condemned by scholars and practical people for their callousness, inefficiency and the unacceptable harm they visit on populations.

Whenever the IMF has leverage over a government, it prods, pushes and cajoles it to implement its stale, even poisonous, recipe of yesteryears: free all markets, generate cash by quickly selling national assets to foreigners, privatize everything the State owns, essentially get rid of the government’s ability to steer the country’s economic development (they will only make a botch of it, is the IMF’s condescending view of any government dependent on its assistance).

Of course, if the country is a postulant or a new entrant in the European Union, its government will be further constrained and shackled in setting its economic, social, fiscal policies and, ultimately, having joined the Euro zone, even in its monetary policies.

The Romanian government, under pressure from the IMF, is considering a second wave of large-scale privatization of its remaining SOEs. The Casa de Economii si Consemnatiuni (CEC), essentially the only large Romanian retail bank not in foreign hands, should be privatized, says the IMF. CEC has 3.4 million clients, EURO 3.1 billion in assets and operates the largest network of branches; in fact, out of the 1000 bank branches serving rural areas of Romania, CEC operates 870 of them! (Roland Berger Consultants, 2010).

The Romanian government has been trying to stall or postpone the process of privatization in this case, looking for ways to shore up the capitalization of the CEC but the EU and the IMF are adamant that no public funds should be channelled to the CEC.

Of course, almost all banks, Austrian, Irish, Spanish, German, British, whether private or State-owned, have received equity injections and loan guarantees from their governments, often drawn from European emergency funds and IMF funding provided to the country; these funds are usually managed by the IMF, the enforcer of the European Union.

For instance, the Austrian banks Erste Group and Raiffeisen International, which own or control the largest banks in Romania, received from the Austrian State capital injections of EUR 1.22 billion and EUR 1.75 billion respectively. In addition, the Republic of Austria is guaranteeing bonds issued by these banks up to EUR 6 billion and EUR 10 billion respectively. All these private banks and privatized banks brought about the worst financial crisis in half a century. Several private banks had to be nationalized to save the financial system from collapse. Great empirical support for the IMF dogmas!

Indeed, Michael Lewis might have been describing the IMF’s policies when he wrote that what we have now is socialism for the banks and capitalism for the rest of us (in his book The Big Short, 2011).

But the Romanian government is “ordered” by the IMF not to support its only remaining retail State-owned bank. Let’s remember that half of the banks in Poland are State-owned or controlled. China, India, Brazil and countless other countries refuse to cede completely the control of their banking sector to “market forces” and are even more adamant not to let their banking sector pass into foreign hands.

Even Canada and the USA, generally market friendly countries will not let foreigners control their banks. In Canada, there is no State controlled retail bank but no single shareholder (or a group of related shareholders) may own more than 10% of the voting shares of a chartered bank and foreign investors, collectively, may not own more than 20% of the voting shares. Yet, Canada is renowned to have the best banking system in the world, a rare one to have weathered the 2007-2008 financial storm unscathed.

What are the policy options for CEC

First and foremost, the Romanian government should declare that the CEC will not be fully privatized. To the extent that retained earnings are not likely to raise sufficiently quickly the level of the bank’s capital to meet international (Based III) standards, the government should partly privatize the bank but only to the extent needed to raise sufficient capital. Its shares should be listed on a stock exchange.

The government should state that only Romanian individuals and entities owned by Romanians will be authorized to own shares in the CEC.

But, let’s be clear: the IMF does not understand, or want to understand, that the alternative to full privatization is better corporate governance of State-owned and State-controlled enterprises.

“Perhaps the most notable change in the practice of state-owned enterprises is the fact that corporate governance has changed significantly in the last decade and a half. Many SOEs have changed their charters to improve internal governance, include outside directors on their boards, provide incentives to managers for good performance, and professionalize management…

In the first place, companies that privatized part of their shares through issues of stock had to induce investors to buy shares by self-imposing limits on the capacity the government had to extract resources from the company. In order to do that, management was professionalized, outside directors were invited to the boards to monitor the company, and financial reporting was improved. Listing on a stock exchange, either to sell shares or bonds, forced companies to comply with high accounting standards, to report financial statements quarterly, and to hire auditor companies like PricewaterhouseCoopers, Ernst & Young, and KPMG. With the monitoring of shareholders, the oversight of stock exchange regulators (like the Securities and Exchange Commission), and the hiring of auditing companies, it became harder for the managers of SOEs to steal profits or to follow fraudulent accounting practices—not impossible, but much harder…

The end result has been a significant improvement in corporate governance and financial reporting and control.”

(The Return of State-Owned Enterprises: should we be afraid?, Francisco Flores-Macias and Aldo Musacchio, Harvard International Review, April 4, 2009)

“State-owned banks should be required to operate on a commercial basis. This requires competent staff and efficient internal systems…[The] governance measures…can ensure that competent senior management are retained with the mandate and freedom to implement the same kinds of systems and controls that would be adopted by any prudent commercial bank[1]”. (“State-owned Banks…Practical Policy Decisions in a World Without Empirical Proof”, A.Michael Andrews, IMF Working Paper, October 2005)

Everywhere governments seek to improve the corporate governance of their SOEs. The balance of advantages and disadvantages of privatized companies over State-owned ones shift in favour of the latter, if and when SOEs are well governed. A well-governed and well-run State-owned enterprise brings the benefit of efficiency in the interest of all citizens of a country, not merely for shareholders.

Of the 100 largest Canadian companies (by revenues) fully 13 are State-owned. Of the largest corporations of the world, on the basis of stock market value, four are State-controlled enterprises.

At Davos 2011, the Chinese and Indian representatives were openly condescending towards the neo-liberal economic model so dear to some western countries and promoted with such touching fervour by the IMF and the World Bank. However all smart governments know that they must improve the governance of their SOEs.

What pressures may be exerted on SOEs to improve their governance and ensure their viability and efficiency:

1.     Whenever possible, open the market to competition; the SOE, having to compete, will adopt the governance and management practices to succeed.

2.     Turn SOEs into hybrid enterprises where private investors may buy a percentage of the equity capital but the State retains control; a State enterprise which becomes partly owned by private investors and which lists its shares on a stock market will have to implement all the rules and regulations of securities commissions and stock exchanges. If it wants to raise additional capital through share or debt issues, it will have to demonstrate that it operates with a high quality of governance.

3.     Finally, if the SOE fails to improve its performance, the option of privatization may be re-activated.

The CEC can play a vital role in the economy of Romania as a State-owned or controlled bank. Several programs of financial assistance to small and medium size enterprises as well as for the agricultural sector resort to government guarantees of bank loans. These programs were devised to help Romanian businesses and farmers access the large European sums available for Romania under various programs of “convergence”. Yet, little has been done. These large amounts remain unclaimed and unspent, a real scandal for a struggling country like Romania.

The CEC should become, on government orders, the prime mover of a dynamic program of financial and technical assistance for entrepreneurs and agri-businesses applying for these European funds.

By law (“a law on modernization of State-owned enterprises”), the government should mandate the CEC and SOEs to adopt state-of-the-art governance principles and processes:

1.     The government should appoint a majority of independent board members; independence means that a board member, or any person related to him/her, has no personal interest in the decisions of the company, receive no monetary incentives other than publicly divulged fees as board members;

2.     All related-party transactions (i.e. between the company and any entity or individual connected to the board or management) must be publicly divulged; the interested member of the board may not participate in the discussion and decision on this transaction.

3.     Mandate the creation of an audit committee as well as a governance and ethics committee; impose on SOEs to be audited by internationally recognized auditing firms;

4.     Require the board to adopt a code of ethics and to publish the code on its Web site and in its annual report;

5.     Give the board the responsibility to appoint and set compensations for senior management but with the approval of the government.

6.     Mandate full transparency, in particular all SOEs should:

·       Publish an annual report available on their Web site containing all relevant information on their operations, measures of their performance, audited financial statements; total compensation of board members and senior management, experience and expertise of board members, their status as independent (or not), the code of ethics, any related-party transactions, etc.

·        

        The annual report must be deposited in parliament within three month of the end of the SOE’s fiscal year; the chair of the board and the chief executive must appear before relevant committees of parliament to respond to all question and issues raised by their performance.

The Proprietatea Fund, in its bid to become listed on the Bucharest stock exchange, has adopted several governance measures along the line of what is proposed here. It could go further in some areas of governance. For instance, the independence of board members is not well established and several board members have serious conflicts of interests.

Nevertheless, the Proprietatea Fund has taken a giant step in the right direction. Given the sizeable stakes in several State-owned companies (as well as in many private companies) the Proprietatea Fund should push all of these companies to adopt quickly (within a year) the governance principles the the Fund itself has put in place.

The message to the IMF is simple: get on board; stop advocating passé policies; work with governments in improving the governance of State-owned enterprises.

For governments of eastern and central Europe, our message is clear: your well governed SOEs are your only remaining grasp on some control over your country’s economic and political sovereignty.

It is your moral and fiduciary duty to retain control of that lever!

                           

Prof. Acad.  Yvan Allaire, Ph.D. (MIT)

Chairman, Institute for governance of private and public organizations (Canada)

                            

Prof. Mihaela Firsirotu, Ph.D. (Mc Gill)

School of Management, UQAM (Canada)

(The opinions expressed here are strictly those of the authors).

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[1] Obviously written before the collapse of the private banking system in 2008-2010; the author might have been less confident in the practices of “prudent commercial banks”

Saving Rosia Montana: it is now or never!

Saving Rosia Montana: it is now or never!

Mihaela Firsirotu, Ph. D.

A new coalition of Romanians from all over the world is circulating the attached PETITION against the development of the Rosia Montana Mining Project by Gabriel Resources/Rosia Montana Gold Corporation.

As you may know, the project has been stalled for almost three years due to a number of administrative and legal actions in the Romanian courts by a number of Romanian and international NGO’s opposed to the project. Recently, the Romanian Authorities, including the Supreme Court of Romania, have signalled their firm intent to accelerate the approval process. Several hurdles have already been cleared.

The Supreme Court has ordered the Ministry of Environment to issue the dam safety permits and a new Urbanism Certificate has been issued. Recently, the Minister of the Environment declared to the press that the project is close to final approval…The last obstacle is for Gabriel Resources/Rosia Montana Gold Corporation to obtain an Archaeological Discharge Certificate from the Ministry of Culture and National Heritage.

 Thus, the purpose of this petition, which is:

Ø   To ask the Ministry of Culture and National Heritage of Romania to refuse to issue a new Archaeological Discharge Certificate to Gabriel Resources/RMGC, as a replacement for the Certificate Nr.4, which was annulled irrevocably by the Romanian Courts. This certificate must not be issued if Rosia Montana is to be saved!

Ø  To ask the Romanian Authorities, including the Ministry of Culture and National Heritage to ask UNESCO to declare Alburnus Maior at Rosia Montana as a World Heritage Site. This is not a pie in the sky! Here is the official statement of UNESCO’s relevant organization (the International Council on Monuments and Sites) regarding the Roman site of Alburnus Maior at Rosia Montana : “an outstanding mining settlement and cultural landscape in Romania, as a potential World Heritage Site”. (October 2008);

Furthermore UNESCO has urged the Romanian Authorities “to protect the site,” and “to collaborate with its various relevant organizations to evaluate the significance of the site of Rosia Montana as a cultural landscape and its archaeological, architectural and ethnographic heritage together with its spiritual values in the context of the cultural heritage of Europe and the world”.

And last, but not least, as Prof.Dr. Ioan Marza, an international authority in geology and on the Rosia Montana’s geoarchaeological treasures, writes: “acordarea avizului de exploatare  ar fi o greseala catastrofica, deoarece in inconstienta noastra, ne-am distruge cel mai de pret argument istoric al latinitatii poporului roman, ilustrat prin lucrari miniere bine conservate(subterane si de suprafata), datate ca fiind de peste 2000 de ani…(galerii romane trapezoidale sapate cu dalta si ciocanul)”[1] 

.

As Romanians and citizens of this world, we cannot be deaf to this call!

If you want to try to save Rosia Montana before it is too late, to see it protected and declared a World Heritage Site, I urge you to register your support by visiting:    http://sites.google.com/site/aurulnostru/home/afaceri-interne/actiuni/petitie    

                                 Or

http://www.petitieonline.ro/petitie-p60566048.html

Please act as soon as possible and circulate the petition to your Romanian friends and acquaintances.

TIME IS OF THE ESSENCE. WE HAVE TO ACT NOW!

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[1] Source: Rosia Montana –Panteonul Istoriei Neamului Romanesc, 22 Martie, 2010, www.cotidianul.ro.

Inauguration of a new site

Country Report on the IGOPP site